Life does not always go as planned and many people invest in life insurance policies because of that fact. No one wants their loved ones to struggle to pay off debts. Life insurance offers a safety net to prevent that type of outcome, but sometimes the unexpected makes a policy seem unnecessary or less useful than the cash invested in the plan.
It is possible to sell a life insurance policy. The decision may seem ill-advised to some because the purpose of the insurance was to care for family members after death takes place. However, in certain situations, the benefit of immediate cash outweighs a future payout. Here is what everyone should know if they want to consider a life insurance settlement.
Reasons to Sell
The decision to sell is a personal choice that the holder of the policy should make. A common reason people want to sell is to help someone live out a final wish. For example, if the holder of the policy is the one who is terminal and wants the cash to take a trip or fulfill a need.
Sometimes people buy life insurance to protect their children. The need declines once their children mature and become self-sufficient. Elderly parents with reliable health insurance and pre-paid funeral arrangements will leave little debt behind for their estate to cover. Parents in this position may no longer have a need for life insurance protection.
A negative change in finances could also be the reason for the decision to consider a life settlement. An insurance policy could supply the cash needed to make vital house repairs, cover a medical bill, or pay monthly expenses.
In addition, sometimes the cost of the policy itself could become unaffordable.
Concerns to Consider
The cash from a life settlement can affect people that receive public assistance like Medicaid or food, heating, and utility benefits. The receipt of the cash from the sale of the policy could disqualify the individual from the programs they need. In this instance, the money used from the sale could become a necessity for survival rather than the extra cash the holder wanted.
In a viatical settlement, the amount of money received varies due to the life expectancy of the person selling the policy.
For example, the National Association of Insurance Commissioners requires that a policy owner receive a 50 percent payout on the face value of a policy when the owner has a life expectancy of two or more years. In contrast, someone with only a few months to live must receive 80 percent of the face value of their policy.
Remember to discuss taxes with an accountant or the company handling the sale. The taxes for life settlements and viatical settlements can complicate plans. The buyer may have to pay a tax on the gains from the policy.
A financial hit can occur if another change in plans means a need for life insurance again. Life insurance rates increase as people age because they have a greater likelihood of passing away. Events like outliving medical expectations or taking guardianship of grandchildren can make life insurance a necessity again.
Find Someone Reputable
Companies that offer this service should have complete transparency with their clients about all the offers received and about any transaction costs and taxes. The brokers should undergo regular training on industry regulations.
At Habersham Funding LLC , we offer our clients the opportunity to make an educated decision about their life settlement. Our knowledgeable staff of advisors, brokers, and agents take the time with every client to answer questions and supply in-depth presentations. We ensure that everyone makes the decision that works best for their needs. Contact us today to learn more.
It is possible to sell a life insurance policy. The decision may seem ill-advised to some because the purpose of the insurance was to care for family members after death takes place. However, in certain situations, the benefit of immediate cash outweighs a future payout. Here is what everyone should know if they want to consider a life insurance settlement.
Reasons to Sell
The decision to sell is a personal choice that the holder of the policy should make. A common reason people want to sell is to help someone live out a final wish. For example, if the holder of the policy is the one who is terminal and wants the cash to take a trip or fulfill a need.
Sometimes people buy life insurance to protect their children. The need declines once their children mature and become self-sufficient. Elderly parents with reliable health insurance and pre-paid funeral arrangements will leave little debt behind for their estate to cover. Parents in this position may no longer have a need for life insurance protection.
A negative change in finances could also be the reason for the decision to consider a life settlement. An insurance policy could supply the cash needed to make vital house repairs, cover a medical bill, or pay monthly expenses.
In addition, sometimes the cost of the policy itself could become unaffordable.
Concerns to Consider
The cash from a life settlement can affect people that receive public assistance like Medicaid or food, heating, and utility benefits. The receipt of the cash from the sale of the policy could disqualify the individual from the programs they need. In this instance, the money used from the sale could become a necessity for survival rather than the extra cash the holder wanted.
In a viatical settlement, the amount of money received varies due to the life expectancy of the person selling the policy.
For example, the National Association of Insurance Commissioners requires that a policy owner receive a 50 percent payout on the face value of a policy when the owner has a life expectancy of two or more years. In contrast, someone with only a few months to live must receive 80 percent of the face value of their policy.
Remember to discuss taxes with an accountant or the company handling the sale. The taxes for life settlements and viatical settlements can complicate plans. The buyer may have to pay a tax on the gains from the policy.
A financial hit can occur if another change in plans means a need for life insurance again. Life insurance rates increase as people age because they have a greater likelihood of passing away. Events like outliving medical expectations or taking guardianship of grandchildren can make life insurance a necessity again.
Find Someone Reputable
Companies that offer this service should have complete transparency with their clients about all the offers received and about any transaction costs and taxes. The brokers should undergo regular training on industry regulations.
At Habersham Funding LLC , we offer our clients the opportunity to make an educated decision about their life settlement. Our knowledgeable staff of advisors, brokers, and agents take the time with every client to answer questions and supply in-depth presentations. We ensure that everyone makes the decision that works best for their needs. Contact us today to learn more.
